Dear Followers&Copiers, In this post I run a SIAScore update for $BKNG. “Formerly The Priceline Group Inc., is a provider of travel and restaurant online reservation and related services. The Company, through its online travel companies (OTCs), connects consumers wishing to make travel reservations with providers of travel services across the world. It offers consumers an array of accommodation reservations (including hotels, bed and breakfasts, hostels, apartments, vacation rentals and other properties) through its Booking.com, priceline.com and agoda.com brands. Its other brands include KAYAK, Rentalcars.com and OpenTable, Inc. (OpenTable). As of December 31, 2016, Booking.com offered accommodation reservation services for over 1,115,000 properties in over 220 countries and territories on its various Websites and in over 40 languages, which included over 568,000 vacation rental properties.” (CNBC)
Another Financial Year (FY) has passed and it’s time to update the equity portfolio of the Global Leaders Portfolio (GLP) in terms of the SIAScore we use. Let’s quickly remind what SIAScore is and how the process :
S1: growing sector 1pts/0pts,
S2: incumbent or prospective global leader 1pts/0pts,
S3: growing or stable wide margins (40%+ gross; 3yr avg) 2pts/0pts,
S4: Net Debt/EBITDA <1.5 (last 3 ended FYs) 2pts/0pts,
S5: above-average cash flows (FCF/MktCap (last 3 ended FYs) > S&P500 Dividend Yield or US 10yr Treasry Yield (higher of the values)) 2pts/0pts;
MAX TOTAL SCORE: 8pts/MIN TOTAL SCORE: 0pts/MIN SCORE TO QUALIFY: 4pts
Let’s analyse each step now…
S1-S2: these qualitative points are clear. $BKNG both operates in a growing sector (S1) and is a clear global leader (S2) in online booking services sector. In both cases the company gets 1 point.
S3: 2 points
2018——2019——-2020——-AVG——-last yr AVG
99,75%…..100%…….100%…….99,92%…….99,2%
$BKNG stopped reporting Gross Profit post 2017; COGS are omittable for BKNG hence taking appx 100% GPM. In real terms its Gross Profit is lower than Net Slaes by the abount of Depreciation, Depletion and Amortisation, but that’s les than 10% of Net Sales, so real GPM is still 90%+.
S4: 2 points
2018——2019——-2020——-AVG——-last yr AVG
-0,98………-0,42……….-1,85……..-1,08…………-1,06
The company is easily cash positive and tendencies are stable.
S5: 2 points
2018——2019——-2020——-AVG——-last yr AVG
6,23%……5,29%………-0,2%……..3,77%……….5,57%
The avg 3yr FCF yield is still easily above the minimum treshold level, which is currently at higher of the two: the $SPX500 dividend yield (1,53%) and the 10Y treasury note yield (1,7%). It must be noted though that 2020 has brought a massive deterioration of FCF yield for $BKNG due to Covid-related lockdowns and travel bans. This should be assumed a one-off though, as most countries in the world slowly restore travel freedom, as vaccinations proceed.
Aggregate score for $BKNG : 8 points (stable YoY).
Conclusion: Fundamentals of $BKNG are very sound. 2020 was very hard for the copmany, just as for the whole travel industry. Valuation-wise it trades at an extreme 1600x TTM PE, with the avg for the $SPX500 Shiller CAPE of 36,6x. This is of course due to Covid-19 and these negative effects will subside going forward. Additionally its 1yr forward PE stands at 26x, which can be deemd acceptable vs. the wide market or tech index @NSDQ100 valuations. Technically the stock has broken above its former 2018 ATH earlier this year and with the positive expectations to the travel market, it can be expected for $BKNG to continue its grind higher. Avg analyst’s 12-month target price for the stock is USD2524.
Best regards, GlobalAlphaS
Disclaimers: None of the ideas, views and thoughts presented here shall ever be taken as a recommendation to buy or sell stocks,bonds,FX,commodities or any other financial instruments as stated in REGULATION (EU) No 596/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC or the Polish Act of 10 February 2017 amending the act on trading in financial instruments and some other acts. The article is for educational reasons and purely presents private views of the author, thus the author shall not be held accountable for any losses of a third party resulting from any potential trading activities in any instruments, both specifically or by category of assets. The author uses his best knowledge and data from sources believed to be reliable, but makes no representations as to the accuracy of the data.Full Disclaimers&Liability Limitations page.
